Sept. 20 (Bloomberg) -- The same federal contractor that
vetted Edward Snowden, who leaked information about classified
U.S. spying programs, also performed a background check that let
the Washington Navy Yard shooter obtain a security clearance.

Now the contractor, USIS, is drawing fire from a U.S.
senator asking how Snowden and Navy Yard shooter Aaron Alexis
slipped through the cracks. The vetting process has also been
included in an inquiry by law enforcement agencies into Alexis’s
activities before his deadly rampage this week.

No company does more U.S. government background checks for
clearances than USIS, which was awarded $253 million by the
Office of Personnel Management last year. The company did about
two-thirds of background investigations done by contractors, and
more than half of all those performed by the U.S. personnel
office, according to Senator Claire McCaskill’s office.

“What’s emerging is a pattern of failure on the part of
this company, and a failure of this entire system, that risks
nothing less than our national security and the lives of
Americans,” McCaskill, a Missouri Democrat, said in a
statement. “We clearly need a top-to-bottom overhaul of how we
vet those who have access to our country’s secrets and to our
secure facilities.”

Alexis, 34, obtained a secret-level clearance from the Navy
in March 2008 that would have enabled him to get the access card
he used to get on the base. After leaving the Navy in January
2011, Alexis kept the clearance even with three arrests, a
history of mental illness and a record of military misconduct.
His clearance was good for 10 years and wasn’t subject to
reinvestigation, according to a defense official who wasn’t
authorized to speak publicly and asked not to be identified.

Clearance Surge

Security specialists say USIS, a unit of Falls Church,
Virginia-based Altegrity Inc., owned by Providence Equity
Partners LLC, is a beneficiary of a system where the number of
people with security clearances surged to almost 5 million as of
last year. Investigators are overworked and underpaid, security
specialists say, and the government has become increasingly
reliant on outside contractors to do background checks.

USIS did Aaron Alexis’s background investigation in 2007,
Ray Howell, a USIS spokesman, said yesterday in an e-mail.
“Today we were informed that in 2007, USIS conducted a
background check of Aaron Alexis” for the U.S. Office of
Personnel Management, Howell said.

OPM Review

Just the day before, Howell said that USIS hadn’t vetted
Alexis, who killed 12 people at the Navy Yard on Sept. 16 and
then died in a shootout with police. The company can’t comment
further because it’s prohibited contractually from retaining
information gathered during its background checks for the
personnel office, he said.

Merton Miller, associate director for federal investigative
services at the Office of Personnel Management, said that the
agency “has reviewed the 2007 background investigation file for
Aaron Alexis, and the agency believes that the file was complete
and in compliance with all investigative standards.”

Once an investigation is complete, Miller said, it is
submitted to the “adjudicating agency” -- in this case, the
Defense Department -- for review. The personnel office’s
involvement with Alexis’s security clearance ended when it
submitted the case to the Defense Department.

‘Inadequate Oversight’

The Pentagon “did not ask OPM for any additional
investigative actions after it received the completed background
investigation,” Miller said.

Senator Rob Portman, an Ohio Republican, said there is
“inadequate oversight of the background check process” that
must be fixed through legislation.

“If this doesn’t make it even more clear that this has to
be fixed, I don’t know what will,” he said in a statement.

Patrick McFarland, inspector general of the personnel
office, has said there may have been shortcomings in USIS’s
vetting of Snowden, a former Booz Allen Hamilton Holding Corp.
employee who worked for the National Security Agency.

Snowden, who leaked information about U.S. electronic
surveillance programs, faces federal charges of theft and
espionage and is in Russia under temporary asylum.

‘Cutting Corners’

Federal authorities are looking into the security-check
process as part of a broader investigation into Alexis’s
activities, said a law enforcement official, who would only
speak on condition of anonymity.

“In light of recent events, we plan to step up our efforts
to investigate and prosecute the individuals and companies who
risk our security by cutting corners and falsifying information
in background checks,” Matthew Jones, a spokesman for U.S.
Attorney Ronald Machen in Washington, said in a statement.

During a June congressional hearing on background checks,
which are required for security clearances, McCaskill said USIS
was under criminal investigation.

Susan Ruge, associate counsel to the Office of Personnel
Management inspector general, yesterday declined to answer
questions about whether her office was conducting a criminal
investigation of USIS.

There’s no simple answer for who’s at fault for letting
Alexis and Snowden slip through, according to Mark Amtower, who
runs a government-contract consulting firm in Clarksville,
Maryland. That the two passed the vetting process may be tied to
the number of investigations that USIS handles, Amtower said.

Added Cost

“You may say these checks should be more thorough,” he
said in an interview, asking who would pay the added cost of
tougher investigations as U.S. agencies look for spending cuts.

Federal clearances and background checks by the personnel
office cost taxpayers about $1 billion last year, an expense
that’s expected to rise to $1.2 billion by 2014, according to
McCaskill’s office.

The surge in clearances has led “invariably to corners
being cut and contractors performing poorly,” said Neil Gordon,
an investigator at the Washington-based Project on Government
Oversight.

Coupled with Snowden’s vetting, the Alexis case “is
definitely going to hurt their reputation,” Gordon said of
USIS. The contractor competes with CACI International Inc. and
KeyPoint Government Solutions Inc., a unit of Veritas Capital, a
New York-based private equity firm.

‘Reinvent’ Government

USIS has gained market share since news broke about
Snowden’s leaks, according to data compiled by Brian Friel, a
Bloomberg Industries analyst. USIS won 75 percent of background-investigation contract orders from the personnel office since
June, compared with CACI’s 19 percent and KeyPoint’s 6 percent.

Friel said it’s been a “reversal of fortune” for USIS,
which had been losing share since 2007.

USIS’s prominence as a background-check contractor is due
to its origin as the Federal Investigations Division of Office
of Personnel Management. The unit, originally known as U.S.
Investigations Services Inc., was privatized in 1996 as part of
then-Vice President Al Gore’s effort to “reinvent” government
by reducing the size of the civil service, according to a 2011
report by the Congressional Research Service.

Contracting out security reviews was designed to save the
government money and secure new work for about 700 investigators
who would no longer be needed because of a declining clearance
workload due to the end of the Cold War. Instead, demand for
security clearances would surge after the Sept. 11, 2001
terrorist attacks.

Criminal Cases

USIS was given a non-competitive, three-year contract for
investigative work with the government personnel office and
granted free access to federal computer databases that weren’t
available to other firms.

The Carlyle Group LP, a Washington-based private equity
firm, and New York-based Welsh, Carson, Anderson & Stowe LP
invested in USIS. They agreed in 2007 to sell USIS to
Providence, Rhode Island-based Providence Equity Partners for
about $1.5 billion.

At least ten background-check workers employed by
contractors who have been convicted or pleaded guilty to
falsifying records since 2006, according to the personnel
office’s inspector general. Eight of them worked for USIS.